Healthcare Fraud 101: Under False Claims Act Investigation

We have already covered the basics of the False Claims Act (FCA), including the steep penalties for violating it. But what do you do if you learn that the government is investigating your practice for alleged false claims? What practical steps can you take to protect your practice and defend it against a possible lawsuit?

How Will You Learn About an Investigation?

Most FCA cases are complex, and it usually takes the government time to investigate before it decides whether to intervene in the case. The good news is that you will often learn about the existence of the investigation during this stage. There are a few ways that you can be alerted to its existence.

First, your practice may receive a request for documents from the government directly, often through what's called a Civil Investigative Demand (CID) from the Department of Justice. Alternatively, if an agency is investigating you, you may receive an administrative subpoena. A CID and an administrative subpoena are very similar. They define certain categories of documents that you must produce to the government and provide instructions on how to respond. You are required by law to respond to them.

Second, you may learn that current or former employees have been contacted by the government to be interviewed voluntarily.

Third, you may learn from third party (such as vendors, patients, or even other practices) that they have received a subpoena or have been contacted for an interview and that the topic of interest is your practice.

The First Steps

When you learn of a possible investigation, the first step is always to try to find out what exactly the government is investigating. Is it a coding practice? Billing for medically unnecessary procedures? The receipt of possible kickbacks for using a medical device or drug?

Hiring outside counsel is critical; this is not the time to try to navigate the situation yourself. Using outside counsel will protect the confidentiality of many communications with employees and management. Most important, outside counsel can effectively contact the government and begin a discussion about the scope of the investigation.

You will also examine the government's request for documents carefully for clues about what is being investigated. For example, if the government asks about all of the lunches, dinners, or travel you have accepted from a specific medical device company, it is likely that kickbacks are at issue. Or if the government asks for the names of all patients who have visited your practice with a specific medical complaint and the codes for which you billed them, it is likely that some sort of billing practice is of concern.

The next step is to take immediate action to ensure that relevant documents are not destroyed or deleted. Once you know you are under investigation, your practice is under a legal obligation to preserve relevant documents. The safest bet is to preserve everything. Your lawyer will work with your IT employee or consultant to prevent the deletion of emails and other electronic documents and to instruct all employees to keep all relevant information.

This may seem like a minor (but expensive) step, but it is critical. A FCA case is civil; deliberately destroying documents to avoid disclosure to the government is criminal obstruction of justice. It is bad enough to be under investigation for an FCA case,  you do not want to kick the hornet's nest by engaging in any conduct that may raise the specter of criminal charges.

The third step is to ensure that your practice does not retaliate against any possible whistleblowers. You cannot engage in a "witch hunt" to try to find a whistleblower or fire the person you have identified as the possible whistleblower. The FCA contains steep penalties for retaliation.

The fourth step is to determine how best to convey to your employees the existence of the investigation. You want to be sure employees understand that they should not talk directly to any government agents if they are contacted. Instead, they should let the agent know that he has to talk to the company's lawyers first.

The Internal Investigation

Once you understand the scope of the investigation from the government's perspective, you need to work with counsel to investigate the conduct in question. This is called an internal investigation and it serves two main purposes.

First, an internal investigation helps you get a handle on what happened and, if necessary, take steps to stop any problematic conduct. It is prudent to err on the side of stopping conduct that the government believes is wrongful, even if the practice has a good reason to continue it.

Second, an internal investigation assists your counsel in developing a defense to the possible FCA case. It will come as no surprise that sometimes a whistleblower or the government has the facts wrong, or has interpreted the facts in a questionable manner. Using the information learned during the investigation, your counsel can work to craft an argument to persuade the government that there is no wrongdoing.

All internal investigations share a few common threads. Counsel will interview your employees to find out what happened. Counsel will also review the relevant documents, internal policies and emails and research how all of these facts fit into the legal framework. Depending on the size of your practice and the conduct at issue, this investigation can take weeks or even months. It can be scaled to your budget, but you should be prepared as this is always an expensive undertaking.

In my view, it is best to hire outside counsel for this investigation who are different from the lawyers who advised you initially on how to comply with the law. The reason is simple: there may come a time when your defense to the FCA case is that you relied on the advice of your lawyers when you undertook the conduct. That can be an awkward (or impossible) defense if those lawyers who advised you that the conduct was legal are the same ones  defending you in court.

Your counsel should also be experienced in criminal investigations or have a colleague who is. That's because the government often engages in what are called "parallel investigations"-that is, the government will conduct a simultaneous criminal investigation and civil FCA investigation. A parallel criminal investigation creates a higher level of risk to mitigate.

The Goal of All This Effort

Your defense to the claims may be that the conduct was perfectly legal, or it may be that you lacked any bad intent to do something wrong. Whatever your defense may be, the single goal of all of this effort is to convince the government not to intervene in the FCA case. This is not an easy goal - once the government has started an investigation, it can be a tough road to convince it to stop. But it is possible to do so, and a careful internal investigation provides the facts necessary to show the government that its case is weak or non-existent.

Next month, we'll discuss what to do if you are a doctor or other individual who receives a subpoena or request for an interview.